Finance

Carriage Services’ Mel Payne “We went big, we went bold, we went long term”

We reported back in February on Carriage Services’ 2019 4th Quarter and their 2019 year end report.  We told you at that time we would be listening for their Earnings Call and would eventually report on that as well.  You can access the entire earnings call from this web page.  Here are some interesting comments from Carriage Services executives that we bring to you:

From William W. Goetz, the newly hired President and Chief Operating Officer of Carriage Services on his impressions over his first 75 days on the job:

“After 75 days, I would tell you, I’m even more excited. I think there is a huge opportunity to grow our business. Grow it in existing markets where we operate today through our decentralized model, but also very excited about what the team has done to bring new businesses into the
fold over the last 60 days. We have acquired some absolutely great businesses.”

“The other thing that I’ve learned over the last 75 days is the decentralized model. . . . .that really gives the autonomy to
our local managing partners, is the right model. It’s the right way to run the business. It’s the right way for us to support families, but it’s
also the right way to maximize shareholder value. And then finally, from an opportunity standpoint of what I’ve learned over the last 75
days, this decentralized model where we give our managing partners the opportunities to make a difference in those communities, has
allowed us to attract, retain and develop A Players.”

From CEO and Executive Chairman Mel Payne commenting on the size and cost of three large acquisitions at the end of the 2019 calendar year (Lombardo Funeral Home in Buffalo, NY; Rest Haven Funeral Home and Memorial Park in Rockwall, TX and Fairfax Memorial Park and Funeral Home in Fairfax, VA), as well as the 2020 1st Quarter acquisition of Oakmont Memorial Park & Mortuary in Lafayette, CA:

We got a great bunch of people, and we got a great bunch of assets. We added some wonderful assets. And if there’s one regret that I
have over the last 29 years has been different times when I’ve had the opportunity to go big and take a big bite, mostly when SCI bought
another consolidator like Alderwoods in ’06 or Stewart in ’14, we had the opportunity to go big.. . . .But if there is one regret is that I didn’t recognize the long-term earning power of some of these big businesses in wonderful markets, like the ones we’ve bought at the end of last year. . . And so this time, we went big, we went bold and we went long term. This is going to transform our company and those who believe and want to do the hard work and study and get out of the covers. . ”

Payne, continuing the discussion this time asked to comment on the Fairfax Memorial Park and Cemetery exclusively as the largest acquisition in Carriage Services’ history:

I dreamed of one day owning it. And I didn’t know if we’d ever get the chance. It had 14 bidders. We recognize it’s been a family business. It’s been not aggressively managed, especially on the cemetery side. And I mean, the funeral home opportunity in that overall area, to expand the brand and grow the market share, is incredible. But the cemetery opportunity is even better. . . .This is the kind of park I always dream someday we would own. I’ve seen this counterpart in other companies like Rose Hill and SCI in L.A., others, and always dreamed of having one of those bell weather companies that has incredible margin growth opportunity, but also revenue growth, both on funeral homes and cemeteries. . . . Well, this is not a good business at a fair price. We bought a great franchise at a high price. And the great franchise has been under managed, possibly improperly, by family that owned it all these years. And now it’s going to be in a company that’s going to know how to turn on the high-performance buttons through leadership and systems. ”

Carl Benjamin Brink, Carriage Services CFO on those same acquired assets and commenting on Carriage Service divestitures: 

“During the fourth quarter, we completed 3 acquisitions, Lombardo Funeral Homes in Buffalo, New York; Rest Haven Funeral Home and
Memorial Park in Rockwall, Texas; and Fairfax Memorial Park and Funeral Home in Fairfax, Virginia, which represented the single largest
acquisition in the 28 years history of Carriage. Shortly after the first of the year, we also closed on the acquisition of Oakmont Memorial
Park & Mortuary in Lafayette, California. . . . .In all, we expect these 4 businesses to generate an annual run rate of $17 million in field EBITDA, once fully integrated in 2020, and grow from there.”

“What investors should take away is that while we may not see this level of acquisition activity always, we do believe these businesses are indicative of Carriage’s long-term opportunity to partner with the best remaining independent businesses in what remains a highly fragmented funeral and cemetery industry.”

“We have made the strategic decision to divest or merge 12 to 15 funeral home businesses throughout 2020 and currently have 3 under
letter of intent. These businesses earned $5 million in revenue and $1 million in field EBITDA in 2019.”

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